Killing dammon this early really messes up several important paths, and you might want to think twice about it. Going after him blocks karlach's personal story since he's the only one who can work with infernal iron to fix her engine, which ends up pretty badly for her. The crafting system takes a hit too since you'll miss out on the flawed helldusk gear and other special upgrades that could've helped later on.

When you reach the last light inn, you'll notice another big gap since he's supposed to be there selling some unique stuff that you can't get elsewhere. The whole tiefling situation at the Grove gets complicated if he's gone, especially during that refugee storyline everyone's trying to sort out. Something to keep in mind is that karlach's romance options get limited without those engine upgrades, and once dammon's gone there's no taking it back without loading an earlier save.

If you're doing an evil run that's fine, but otherwise probably best to keep him around unless you're really sure about cutting off these options. Good luck either way!